One method firms can use to solve the duopolists' dilemma is to engage in:
A. predatory pricing.
B. tying contracting.
C. marginal cost pricing.
D. low-price guarantees.
Answer: D
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When do insurance companies encounter the problem of moral hazard?
a. When simply having insurance causes people to take more risks than they would otherwise. b. When they do not have enough information to distinguish between people who are "good risks" and those who are "bad risks." c. When the price of insurance premiums fully reflects all available information. d. When the insurance company suffers large losses because a major catastrophe has affected a large number of people simultaneously.
Under a regressive income tax system, individuals with higher incomes pay higher marginal tax rates
a. True b. False
Suppose you were given a gift of a gold mine that generates $1,000 of net income every year, indefinitely. And suppose the equilibrium rate of interest is 5 percent. What is the present value of that gold mine?
a. $20,000 b. $5,000 c. $50,000 d. $500,000 e. $10,000
Which of the following is true of a production possibility frontier?
a. Producing on the production possibilities frontier implies productive efficiency, and society producing where it wants to be producing implies allocative efficiency. b. Producing on the production possibilities frontier implies allocative efficiency, and society producing where it wants to be producing implies productive efficiency. c. Producing on the production possibilities frontier implies both productive efficiency and allocative efficiency. d. Producing where the society wants to be producing implies both productive efficiency and allocative efficiency.